The Many Fallacies of CSR

Corporate philanthropy has always been a part of India’s business culture but what had remained voluntary so far was officially inserted into the legislation governing companies with the new Companies Act 2013. In fact India became the first country to actually do something that several countries had only been discussing for years. However, unlike other countries which envisage internal tweaks in operations, India’s approach to CSR is towards external philanthropic initiatives to be taken up by companies. Ever since its implementation, a lot of eligible Indian companies have gotten themselves involved in and lent a helping hand towards making India a better society. Several studies/reports have also indicated that companies too benefit from indulging in such initiatives in the form of an improved brand image, consumer loyalty as well as a motivated workforce. On the flip side, its an increased cost to the companies who could’ve used the money in strengthening their balance sheets or bettering their offerings. The current CSR legislation is a great initiative but is highly flawed in its approach with its actual contribution to the development of the society being questionable. However, with some tweaks it can yield better results and truly serve as an example for the rest of the world to follow. This article seeks to identify the numerous flaws in the legislation which enables loopholes for eligible companies to actually not contribute to the objectives envisaged by the legislation, with the backdrop of approaches adopted in other countries. It also looks at the advantages and disadvantages of having a mandatory approach towards Corporate Social Responsibilities and how it has fared thus far. Lastly, the paper offers solutions to the problems faced by the legislation in achieving its desired objective as well as suggestions for strengthening the legislation even further.